However, national house price growth was being inflated by the outsized gain in Sydney, Mr Kennedy said.

“The details suggest that this strength is landing in one property sector,” he said.

“We think that prices will moderate a little bit further as activity cools, particularly in Sydney where price growth remains very strong at levels that won’t be sustainable.”

Commonwealth Bank senior economist Michael Workman said the rapid pace of house price increases might be a concern for the central bank.

“While rising asset prices are positive for household sentiment for households that own a dwelling, increases in property prices pose affordability issues and increase household debt,” he said.

“Dwelling price growth momentum is likely to ease over the near term as the housing supply increases, given the pick up in dwelling commencements, and rental yields take a hit given the rise in dwelling prices.”

Comments on this story

Will this surge in house prices in populated areas like cities flow on to smaller towns of Tassie in the NW or will it still be a case of stagnant slow moving sales again!

Mathew Munro of Hobart Posted at 11:07 PM August 12, 2014

And the government is asking public servants, even the lowest paid ones who most likely don't own a home, to freeze their wages!

Peter Harwood of Hobart Posted at 4:58 PM August 12, 2014

With the house prices rising I will definitely by raising the rents on my six investment properties. With this extra rent, capital gains and all that wonderful negative gearing I am feeling richer by the day.